Rentals are cool—here’s where the deals are increasing

Zillow July Rent Report Shows affordability is increasing in some U.S. cities. The construction boom brings new units to the market, increasing supply and forcing landlords to incentivize tenants.

Amid the rental rollercoaster of the past few years, the latest news will be welcomed by prospective tenants, although rents have continued to rise from a year ago and remain on an upward trend in many markets.

More deals and a building boom

One-third of property managers are offering offers such as a month’s free or half-price rent and free parking that will help tenants get through the initial difficulties of moving funds, deposits and rent in a soft market.

Zillow said in its report that June saw more Multifamily More units were completed than in any month in nearly half a century, creating options for cash-strapped tenants. Cafe for rent Approves Zillow’s findings, statement Developers expect to complete a record 518,108 rental units by the end of 2024, an annual increase of 9% and a 30% increase from 2022.

Zillow statistics show that typical U.S. rents rose 0.4% to $2,070 in July. this That was down slightly from the 0.5% increase in June and the 0.6% increase in April and May. Annual rent growth also slowed, with rents increasing by 3.4% annually compared with 3.5% in June.

Increase affordability

These wonderful The magnitude of the growth slowdown has tipped affordability, with tenants now on the right side of the cost affordability threshold, meaning they pay just under 30% of their monthly income in rent.

Property managers have responded accordingly, with 33.2% of national rental homes on Zillow offering deals in July, up from 25.4% last year. In the Sun Belt, where most construction is taking place, discounts are even higher (the only exception is Salt Lake City, which is not in the Sun Belt), with more than 50% of Zillow listings offering discounts in the following cities:

However, across the country, the rental market is changing. Four cities saw a decrease in their share of concession listings compared to last year. These are:

Diverse national market shows affordability issues persist

the latest one new york times The article provides an in-depth analysis of the broad rental market, noting: “Many tenants are paying rents negotiated early in the housing cycle, while new construction has concentrated In luxury markets, this won’t do much to help low- and moderate-income renters, at least in the short term.

the latest one wall street journal The article points out rent expected arrive Northeastern and Midwestern cities will experience an upward trend in population by 2024, e.g. Kansas City, Missouriand washington d.c.,No thunderbolt Insight. Overall, however, tenants’ rental outlook is more encouraging than a year ago, with the Zillow Watch Tenant Demand Index – a measure of rental market tightness – showing a 23.3% decline since last July. A large number of new rental properties have entered the market. Increased supply creates a healthier rental ecosystem, which is reflected in developments across markets Completed.

How falling interest rates will affect rents

As interest rates fall, the rental market is likely to soften even more as more renters can afford to buy. However, calling employees back to the office Full-time or mixed It will also play a role in causing employees to abandon the remote work/rental lifestyle.

Construction costs also affect rental prices. Developers that lock in higher interest rates can focus on lower-risk projects in areas with high rental demand and strong job growth.

Doug Ressler, senior analyst and business intelligence manager at Yardi Matrix, Tell RentCafe:

“The overall impact on developer numbers may vary by region. In places like Texas, for example, demand for apartments remains strong due to factors such as corporate relocation and high housing prices. On the other hand, demand for apartments remains strong due to the impact of the economic environment. , new construction starts are slowing in some markets.

Some great statistics from a recent Zillow report

rent

single family rent

• typical As of July, single-family homes sold for $2,294, up 0.4% month after month.
• Single-family home rents are currently up 4.7% from last year.
• Since the outbreak, single-family rents have increased 40.1%.
• Only two metro-area markets — Milwaukee (-0.7%) and Austin (-0.02%) — saw rent declines on a monthly basis.
• Single-family home rents increased year over year in 49 of the 50 largest metropolitan areas.
• Cleveland has the highest annual rent increase for single-family homes (8.6%), cincinnati (7.8%), Indianapolis (7.5%), columbus ohio (7.2%) and Louisville (7.2%).

Multifamily rentals

• As of July, the typical asking rent for a multifamily apartment in the U.S. was $1,916, up 0.4% month after month.
• Rents increased by 2.6% compared to last year.
• Rents have increased 27.3% since the outbreak began
• Multifamily rents drop in these Sunbelt cities Calculated by month: Austin (-0.3%), Phoenix (-0.2%), San Antonio, Texas (-0.1%), jacksonville florida (-0.1%) and las vegas (-0.02%)
• Multifamily apartment rents increased in 40 of the 50 largest metro areas, including largest Growth in smaller cities: Hartford (8.3%), Providence (7%), Cleveland (6.5%), Louisville (6.2%) and Richmond (5.1%).

rental affordability

• Although the median household spends 30% of its income on rent, an important The cost burden indicator is still higher than the pre-pandemic level of 28.6%.
• The most affordable metro areas for rent are minneapolis (20.2% of median income spent on new home rentals), Salt Lake City (20.3%), St. Louis (20.6%), Austin (21%) and Raleigh (21.2%).
• The cheapest metro areas to rent are Miami (42.9% of average income is spent on typical new rent), New York (42%), Los Angeles (37.4%), San Diego (34.1%), and Riverside, California (33.8%).
• required income Easily Affordable Typical American Rentrental expenses do not exceed 30% of annual income, which is $82,795.

final thoughts

Any softening in the rental market compared to past years is good news for tenants. However, The lens must be widened to get a more accurate picture. Since the outbreak, rents for all property types have risen sharply, ranging from 27% to 40%. Although salary bigger There are also Unmanaged keep up the pace Add in rent, especially when other living expenses like food and energy be taken into account.

As a result, long-term affordability issues remain in much of the country, particularly in parts of the Northeast and Midwest, where rental inventory remains low or high. As seen in the sunbelt (This happened in New York toobut it is a very expensive city in the first place) and other parts of the country are still in need of building bonanzas so investors who provide affordable housing in these areas will find endless demand.

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Notes on BiggerPockets: These are the opinions written by the author and do not necessarily represent the views of BiggerPockets.